How to perform a skills-gap analysis: the ultimate guide

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Skills gaps, also known as talent gaps or talent shortages, are defined as the difference between the skills of your workforce and the skills your employees need for your organization to achieve its goals. 

A skills-gap analysis can therefore be an important part of your toolset as an HR professional, as it enables you to assess talent shortages before they significantly impact your organization’s performance. 

This article will explain what a skills-gap analysis is, why you need to do one, its benefits, and how to perform one effectively.

What is a skills-gap analysis? 

A skills-gap analysis is an HR method companies use to compare the skills needed to perform a specific job role with the skills currently possessed by the employees. 

Using this method, the HR team can determine what skills and knowledge are lacking in their workforce and they can design a plan to address these gaps. Most frequently, gaps can be bridged with additional training, upskilling or reskilling staff, succession planning, and investing in learning and development

image showing definition of skills-gap analysis

A skills-gap analysis aims to determine the difference between the skills your employees currently possess and the extent to which they can reach your business goals. This difference is the “gap” you need to fill via training and reskilling if you want to reach those business goals. 

Why do you need to perform a skills-gap analysis at your organization?

According to the World Economic Forum’s The Future of Jobs Report 2020, around 85 million jobs will be lost due to automation and the rising Covid-19 recession by 2025. 

At the same time, however, 97 million new jobs will be created by rapid technological advancements and digitalization. Robots will do half of these jobs, leaving the other half for humans.

Businesses will need to upskill and reskill their employees if they want to remain competitive in the future, especially because half of their workforce will be replaced by machines. Those who don’t adapt risk being displaced by companies that invested in their workforce.

This means that companies across many industries will need to change how they view work and start implementing strategies to redesign jobs altogether. Indeed, the same report states that around 94% of employers expect that employees will pick up new skills on the job, with 40% of the workforce requiring reskilling of up to 6 months. 

That is why companies must begin planning how to stay competitive in the labor market. An excellent place to start is by doing a skills-gap analysis and finding out current employees’ skills and knowledge before trying to change them altogether. 

What are the benefits of a skills-gap analysis? 

Performing a skills-gap analysis has several advantages that will help you improve the performance of your workforce and achieve better results. 

image listing the benefits of a skills-gap analysis

A skills-gap analysis enables you to: 

1. Adapt your training efforts to employees’ individual needs

First of all, a skills-gap analysis will enable you to concentrate your efforts on specific training courses for particular employees instead of just training everyone in the same way. Some employees may lack some soft skills, while others may lack hard skills, and doing a skills-gap analysis will help you determine exactly that. 

2. Allocate learning and development resources more efficiently

You will also be able to better allocate your financial and labor resources for learning and development by setting specific goals for what needs to be done.

If you lack the information provided by the skills-gap analysis, you won’t be in a position to determine the best training program for your staff or be able to allocate resources in the best possible way.

3. Improve your competitiveness

A skills-gap analysis will not only enable you to resolve current workforce issues you didn’t know about but will also help you stay ahead of other companies by keeping all employees up to date with new trends and techniques for certain tasks. Since businesses are constantly evolving, the last thing you want is to become uncompetitive. 

4. Create a comprehensive talent strategy

Knowing which skills your employees possess and what they lack will contribute to building your talent strategy.

A clear understanding of who can do what and knowing in what position to put them is the fastest route to building an enthusiastic and engaged workforce, helping you stay ahead of the competition. 

The information you receive from the skills-gap analysis will also help establish a plan for what individual employees need to do to improve their work and boost productivity. 

5. Design a recruitment strategy tailored to your needs

Finally, conducting a skills-gap analysis will aid your recruitment efforts. If you identify what skills you need but are currently lacking in your business, you can better source people with those qualities. 

This will immediately lower your costs for hiring and training, assist the onboarding process, and drive down turnover rates. 

In essence, doing a skills-gap analysis has many advantages and will prove beneficial for your entire business. 

When should you do a skills-gap analysis?

Ideally, you want your employees constantly at the top of their game. Realistically, however, that won’t always be the case, and you do need to retrain and reskill employees periodically.

But you shouldn’t jump the gun just because you think you need to do a skills-gap analysis or because a competitive company is currently doing it.

You want to examine your business properly and take into account the following trends:

  • Are you missing deadlines? 

  • Are projects lagging behind?

  • Are you failing to meet business goals?

  • Are you introducing new working methods or technologies unfamiliar to your staff? 

If the answer is yes to any of these questions, you will probably need to do a skills-gaps analysis. Bear in mind that this is an ongoing process, and you will constantly need to return to it and reassess it to get an edge over your competition. 

Going through what a skills-gap analysis is, why you need to perform it, and what its benefits are, we can now dive into the details of how to actually conduct one. 

How to perform a skills-gap analysis: a step-by-step guide

Now that you know the benefits of a skills-gap analysis, let’s look at how to conduct one.

In this section, you’ll find a step-by-step guide to successfully analyzing the skills of your workforce.

image showing the steps on how to perform a skills-gap analysis

1. Define business goals

To do a skills-gap analysis, you first need to understand your company goals. This begins with considering your organization’s current and future business strategy. What do you want to achieve now and in the long run? 

You can ask yourself the following questions:

  • What are the company’s goals for the next one, three, and five years?

  • Are there any specific tasks and projects on the horizon?

  • Do employees have the necessary skills to complete these projects? 

  • In which areas does the company need to enhance skills? 

Having the answers to these questions will help you plan a strategy to guide you when doing your skills-gap analysis. Doing this will give you a better understanding of which training and skills need to be prioritized in order to achieve the company’s goals.

2. Involve your leadership to define medium- and long-term goals

Following on from the above, you will want to get your stakeholders involved in the process of defining your company’s goals.

They will know best what they want the company to achieve in the long and short term, whether it be higher productivity, more sales, or lowering overall costs.

In addition, your company’s leadership will have better insights into current and future trends that they can share with you. You can use that information to plan your skills-gap analysis adequately. 

You will want to ask them questions such as: 

  • What part of your industry will become automated in the future? 

  • What future positions will the company need to perform tasks?

  • What skills are currently on the rise that will benefit the company? 

Involving your leadership in defining these goals and understanding these trends will significantly aid you in performing a better skills-gap analysis. 

3. Determine whether you are going to do an individual or team assessment 

Organizations usually carry out a skills-gap analysis on two levels: an individual level and a team/company level.

On the individual level, you can determine the skills needed to perform a specific job and whether or not an employee has them to perform their duties. 

On the team or company level, you can identify if your whole team has the necessary skills and knowledge to do a project and whether or not you will need to hire external personnel to aid them. 

Ideally, you want to do both types of skills-gap analysis because they give you valuable insights into the skill levels of specific employees and the whole team. Knowing this enables you to tailor training for individuals and teams without putting them under a common denominator. 

4. Identify the skills you need to achieve these goals

Once you determine your business goals and have a clear understanding of what needs to be done, you can identify what skills will be required to achieve your goals. You can do this in a variety of ways.

Consider which skills your employees possess now and what they will need to perform their jobs in the future. Think about current job descriptions, company values, and the business goals you identified earlier.

You can also involve team members and ask them which skills they think they lack. This can only prove insightful for your skills-gap analysis, but it will also boost morale as team members feel part of the company’s transformation. 

Once you list the desired skills, you can also rate them as basic, intermediate, or expert. This way, you can make a scale by which you can determine the level of expertise of individual employees and whole teams.

After you do that, you are ready to measure these skills. 

5. Measure skills internally

There are several ways to measure skill levels.

image showing the different ways to measure skills internally

a. Use skills tests to evaluate employees’ skills objectively

Skills testing is by far the best way to assess the skills your employees currently possess.

TestGorilla has a library of easy-to-use tests that measure both soft and hard skills, personality traits, language proficiencies, and abilities to fit into a company’s culture. 

These tests are designed by experts in their fields and will give you great insights about a person’s skill level that are objective and easy to understand. 

b. Use a personal SWOT analysis 

Companies use the SWOT analysis to evaluate their competitive position in the market and design a framework for developing strategic planning. 

SWOT stands for strengths, weaknesses, opportunities, and threats. It is a useful tool that can give companies fresh ideas, provide perspective on what they are doing right and wrong, and identify dangers they need to avoid. 

Again, you can use the SWOT analysis to measure your company’s skills on the individual or team level. It enables employees to identify where they feel confident and what skills and knowledge they think they may lack. 

Usually, the SWOT analysis method asks the following questions for each of the four elements (adjusted for an individual-level analysis based on skills):

image showing what SWOT analysis means
  • Strengths

    • What are your top strengths that are considered assets for the company?

    • What skills do you possess that help you perform your job? 

    • What motivates you to succeed in what you do? 

  • Weaknesses

    • What skills do you think you lack that hinder your job performance?

    • Why are you underperforming in some areas more than in others?

    • What internal factors that you know of may hinder your progress? 

  • Opportunities

    • What can you do individually to perform certain tasks better? 

    • What new tools and technological advances are available at the company which you can use to do your job more efficiently? 

    • What new mentorships and training modules are available at your company to help you upskill?

  • Threats

    • Do you experience difficulty using new technologies that have been implemented at the company? 

    • Do you have any fears about your job security? 

    • Is automation taking up any of the tasks that you used to do? 

Once employees go through individual SWOT analyses, you can gather and use that information to measure their current plethora of skills. 

c. Use a 360-degree evaluation

Since you are measuring skills internally, you will want to gather feedback on employees. This is known as a 360-degree assessment or evaluation, and you can get it by asking for performance feedback from: 

  • Peers

  • Team leaders

  • Management

  • Subordinates

  • Customers

Once you get enough information, you can create a detailed picture of an employee’s skills and knowledge, and you can use that to prepare their future training. 

Remember that such evaluation is subjective and can be negative if you receive feedback from someone who is not on good terms with the employee. That is why you should look at emerging trends and avoid jumping to conclusions from the start. 

d. Hire an external evaluator

You can also hire an external evaluator to measure your company’s skill levels. 

The benefits of this method are that you leave the whole business to a professional, and you don’t have to worry about going through all these steps to do a skills-gap analysis. In addition, the external evaluator may be more objective in their assessment.

However, the external evaluator will not have the same information about your organization as you have. They will not know your employees or the company values, and everything they say will be based on limited research. This can have adverse effects as the external evaluator will be unable to understand the intricacies of the company, and their evaluation may not give you the full picture. Apart from that, you will need to fork up a hefty sum to pay them for the service. 

6. Identify skills gaps

Using one of the above methods, or a combination of a few, will provide you with sufficient information. The next step is to analyze the collected data and identify skills gaps.

You may wish to create a ranking system where you can measure individual employees’ skills, for example rating them from 1 (poor) to 10 (excellent). Once you have done that, you will be ready to bridge the gap between future goals and current skill levels capable of achieving them. 

You can do this by providing mentoring, training, hiring new personnel, or outsourcing tasks to contractors. 

7. Create a plan to address the gaps 

Once you have a clearer picture of individual and team skills levels you can create a plan on how to address the gaps you have found. Based on your available resources, time, and personnel, you can decide which of the following four methods you wish to use. 

a. Provide mentorship

If employees have the necessary skills to perform their tasks but need to sharpen their skills ever so slightly or gain extra knowledge, you can assign them a mentor. This will usually be a senior member of your team who can develop and expand their skills. It is the least costly method and can significantly benefit individual employees. 

Indeed, this is where you can consider succession planning for specific roles. Succession planning identifies which positions are important at your company and who the potential candidates are to take over those roles in the future. 

However, this is no easy task, as the successors for some roles need the necessary skills, training, and experience to take on a new role.

If you manage to identify roles that may be filled by certain employees with the necessary skills, providing mentorship to them from those currently in charge is a great way to utilize your current talent pool and retain key employees in the company. 

b. Train your employees

Most of your employees will need some additional training to perform better in the future and provide you with added benefits. This is the perfect opportunity to invest in learning and development. Learning and development is a systematic approach to improve your employees’ knowledge, skills, and attitude (KSA).

You can create internal training programs that sharpen employees’ skills or provide them with new skills and expertise needed for new tasks or roles. The training programs can include seminars and workshops, which can be done weekly or monthly. It all depends on your needs.

If you have the budget for it, you can also invite external training agencies to develop your employees’ skills. This will free up your time to do other important tasks, leaving the mission of bridging the skills gaps to the professionals in the field. 

c. Hire new employees

If the gaps you discovered are too wide to be filled with additional training and mentoring, you could opt to hire new staff and thus add fresh ideas and skills into your company.

You want to keep in mind what you have learned while identifying current skill gaps in your company and modify your criteria when searching for new employees. You will want to:

  • Prepare detailed job descriptions that outline precisely what you need

  • Outline the specific soft and hard skills that your organization currently lacks.

  • Make use of structured interviews to ensure prospective candidates meet your criteria

  • Try and recruit passive candidates since they already possess the skills you’re looking for

  • Ask candidates for specific examples of how they have demonstrated the skills you require in their previous experiences 

d. Outsource tasks to contractors

Finally, if you do not have enough time to source new personnel or train your own and you have a looming project on your head, your best bet is to outsource the task to an external contractor. 

This way, you instantly gain the skills and knowledge you are looking for without going through the process of training or recruiting. Of course, this method comes with a higher price tag, so be ready to fork up if required.  

8. Perform a skills-gap analysis at regular intervals 

Even though it is a daunting task at first, you will develop the knowledge and experience to perform skills-gap analysis more often.

Ideally, you should do them once every quarter – but if that sounds too much, you can do them twice a year instead. It is, however, not a one-time thing: You need to do these assessments with a certain frequency. 

Doing so will give you a competitive advantage, ensuring you are always on the top of the game, know what skills and knowledge have evolved in your company, and understand which employees need further training.

You will want to create a template you can use every time you want to perform a skills-gap analysis and make the whole process smoother. You can also automate it, sending emails to employees with questionnaires every 3 or 6 months to establish a constant flow of information. 

To measure the effectiveness of new training and hiring initiatives, you need to assess skills regularly

Once you have carried out a skills-gap analysis, you want to ensure all your hard work bears fruit. You can use the following methods to measure effectiveness and assess skills. 

1. KPIs

KPIs (key performance indicators) are a good way to assess progress towards an intended goal.

Essentially, you set targets and track the progress towards that target. You have leading indicators (everyday tasks that drive you towards your goals) and lagging indicators (past successes in achieving that goal that you can compare with the leading indicator).

In the same way you use KPIs to track company objectives, you can use them to track employees’ skill levels and whether or not they are advancing towards their goals. 

For example, let’s say an employee needs to learn C# coding because they are moving towards the IT sector of your company. They will need to pass certain tests, and if they do that successfully, they progress towards their target of learning C#. If not, then you need to schedule additional training and resources.

Thus, you can use KPIs to compare different employees and see emerging trends. If someone lags behind their peers, you need to correct that via more reskilling. 

2. Skills evaluations

You can also make use of skills evaluations to measure the improvement of employees’ skills. Using various tests and real-life scenarios will provide you with enough information about how much an employee has learned and what they still need to work on.

You can use TestGorilla’s pre-employment assessments with current employees to judge their skills and knowledge – on individual employees or the whole team. 

3. Reviews

As mentioned above, evaluations and reviews are a great way to find out more about the skills your employees possess or lack. 

Going over annual performance reviews, reports from management, and feedback from peers and team leaders about specific employees is another way to measure an employee’s progress towards their goal of acquiring a new skill.

You will begin to see trends while carrying out the evaluations – certain strengths and weaknesses will start to show.

You should involve the employee as well. Ask them about their performance levels, if they feel like their needs have been met, and whether or not they require additional training and resources. Give them feedback based on the information you have gathered on them and work together to strengthen their proficiency. 

Performing skills-gaps analysis will help you better understand the talent needs of your organization

Performing a skills-gap analysis is important to help you understand what skills your employees are missing that may be crucial for your company’s development.

Completing the process will enable you to track the skills your workforce is missing and what their strengths are. As a result, you’ll be able to create training initiatives tailored to your organization’s specific needs, and you can better address the challenges of talent shortages. 

In short, a skills-gaps analysis enables you to focus on how to enhance and further develop your employees’ knowledge and skills.

As a result, your company will profit from having a more skilled workforce, increasing productivity, and improving business outcomes. 

Additionally, employee satisfaction will improve: Investing in your employees’ skills shows them that you value them, and they’ll feel more engaged and empowered. With these benefits, your company can take on more projects and become more competitive in the long run. 

With TestGorilla, you’ll find the skills-gap analysis process to be simpler, faster, and much more effective. Get started for free today and start making better hiring decisions, faster and bias-free.

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